The new income tax regime as per Union Budget 2020 offers tax rate reduction from 20% to 10% and from 30% to 20% as per relevant income tax slabs. As a taxpayer, you can choose between the new and the old income tax regime for the FY (Financial Year) 2020-2021. The basic tax exemption limit for an individual will depend on his/her age and residential status. In case you choose the new tax structure, you have to forego about 70 exemptions and deductions such as that from LIC premium, House Rent Allowance, Mediclaim, Education, and others
Here are the 3 categories for individual taxpayers:
In this post, we will discuss the special relief measures for taxpayers given the COVID-19 crisis, deductions and exemptions to forego if you choose the new tax structure, calculation and illustration of income tax as per the new and old regime of income tax slabs and rates, comparison between these two tax structures through simple calculations, and FAQs.
The Covid-19 pandemic has affected not just the Indian economy, but the global economic negatively in many ways. To counter the ill-effects of the same, the Centre announced few relief measures for taxpayers:
For the Financial Year 2020-2021, you can choose between the old and the new income regime. If you choose the new tax structure, here are the some of the common deductions and exemptions you need to forego:
Do note that the option to exercise the choice between old and the new tax regime should be on or before the due date of filing ITR for AY (Assessment Year) 2021-22. You can withdraw the option (whichever of the two) exercised only once, if you have a business income. If you withdraw the option, you can never opt-in for the forgone option again.
Income tax in India is calculated based on different tax rates applicable to different income groups. The income accountable is the annual gross income, which is then segregated in different slabs. The income tax rate is set as per these annual income slabs. Thus, to calculate income tax, you must know the annual taxable income slab you fall in, the tax rate, and the provisions of various Sections of the Income Tax Act that offer exemptions and deductions.
Below, we have discussed the income tax slab and rate as per the latest Budget 2020 announcement:
Here are the details:
For instance, your total annual income is Rs. 16 lacs for FY 2020-2021. Now, your employer contributes Rs. 60,000 for that FY to the NPS account. The NPS account contribution is eligible for tax deduction under Section 80CCD (2).
Below we will discuss about New Tax Regime FY2020-21 and Old Income Tax Regime:
Available exemptions and deductions under Section 80C is up to Rs. 1.5 lacs, under Section 80D up to Rs. 25,000, standard deduction up to Rs. 50,000. HRA (House Rent Allowance) exemption varies at each income level.
Here is the tax benefit for this scenario:
The deduction under Section 80D and Section 80C is Rs. 25,000 and Rs. 1.5 lacs, respectively, whereas standard deduction is Rs. 50,000. Together, the total tax deduction you can claim is Rs. 2.25 lacs.
Here are the FAQs on Budget 2020 Income Tax changes for FY2020-21:
If your annual income is up to Rs. 5 lacs then you may not have to pay any income tax. This is because of the tax rebate facility (under Section 87A) for salaried individuals. This rebate is up to Rs. 12,500.
As per the Budget 2020, you can choose to select the old tax regime, if not the new tax rate. The income tax calculation is done in the following manner in this scenario:
Here are details about the new Income Tax regime FY20-21:
Here are the respective details:
The income tax on salary is calculated based on your annual salary:
Here are the reductions in TDS rates:
Here are the reductions in TCS rates for sale of:
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